How To Start Investing For Beginners With Little Money

What to learn how to start investing for beginners? Here’s my tips on where to start investing, even if you have little money. I always say the first thing you need to do if you want to start investing is to just jump in. However, what if you don’t really even know how to start…

Michelle Schroeder-Gardner

Last Updated: March 18, 2022

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how to start investing for beginners

What to learn how to start investing for beginners? Here’s my tips on where to start investing, even if you have little money.

I always say the first thing you need to do if you want to start investing is to just jump in. However, what if you don’t really even know how to start investing?

In addition to not knowing how to start investing, it can be scary, stressful, and overwhelming to begin.

Even though it can be scary, it will probably be one of the best decisions you make when it comes to being prepared for retirement.

With today’s post, I hope to make it easier than ever with my beginner investing tips so that you can start investing your money and build a retirement fund as soon as possible.

Just as a refresher, you want to invest because:

  • It can help make sure you aren’t working for the rest of your life.
  • You can retire sooner rather than later.
  • You can lead a good life well after you finish working – traveling, pursuing your hobbies, volunteering, or whatever you choose!
  • Compound interest means the earlier you save the more you earn.
  • You won’t have to rely on your children or others in order to make ends meet.

Investing is important because it means you are making your money work for you. If you weren’t investing, your money would just be sitting there and not earning a thing.

This is important to note because $100 today will not be worth $100 in the future if you just let it sit under a mattress or in a checking account. However, if you invest, you can actually turn your $100 into something more. Investing for the long term means your money is working for you, potentially earning you an income.

For example: If you put $1,000 into a retirement account that has an annual 8% return, 40 years later that would turn into $21,724. If you started with that same $1,000 and put an extra $1,000 in it for the next 40 years at an annual 8% return, that would then turn into $301,505. If you started with $10,000 and put an extra $10,000 in it for the next 40 years at that same percentage rate, that would then turn into $3,015,055.

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I’ve talked a lot about savings here on Making Sense of Cents, and in my post 56% Of Americans Have Less Than $10,000 Saved For Retirement, I stated that 56% of Americans have less than an average of $10,000 in retirement savings and 33% have no retirement savings at all. This is something incredibly important to address! And, some of those statistics are because many don’t know how to start investing.

Other interesting statistics mentioned in this article include:

  • 42% of millennials have not begun saving for retirement.
  • 52% of Gen Xers have less than $10,000 in retirement savings.
  • About 30% of respondents age 55 and over have no retirement savings whatsoever.
  • Nearly 75% of Americans over 40 are behind on saving for retirement.

One of the biggest reasons I’ve noticed is that people don’t realize that they should be saving more or, like I said, they don’t know how to start investing. Again, investing for beginners can feel daunting, so don’t feel like you are alone. And, the reality is that you don’t need much to get started.

If you have never invested before and are wondering how to start investing, I have broken down the steps to make easy to start investing for beginners, even those who feel like they don’t have much money to invest.

How to start investing for beginners:

 

1. Start saving your money.

“The best time to invest was yesterday; the second best is today!”

That’s one of my favorite investment quotes, and it explains why starting to save for investing should happen right now.

And, my top investing tip goes right along with it: start setting money aside today.

In order to invest your money, you need to actually set aside money for investing. How much you set aside is entirely up to you, but I think more is always better if you can manage it.

Okay, you may be thinking “How much money should I save if I don’t have much money?!”

The key here is saving as much for investing as you realistically can. This may be nowhere near 20% at first, heck, this might not even be 5%, but any little bit will help. If you are not able to save that much, just save something! Investing for beginners can be as little as $25 a month – seriously, every little bit does help.

Even if it’s just $1 a day, set that amount aside and start saving even more.

You may want to look into Acorns, which is a cell phone app that rounds up your credit card and debit card purchases, and then invests your spare change. Acorns automatically invests for you, and you can get started in under 5 minutes. This app is amazing!

You can always work your way up to saving a higher and higher percentage of your income to put towards investments. Starting small is an easy way for beginners who are wondering how to start investing. I understand that some people have financial situations in which they may not be able to save as much money as they would like. Living paycheck to paycheck, being in medical debt, or having a major unexpected expense can wreck a person’s financial situation and their goals, and I understand that.

However, there are options to getting out of those negative financial situations. Cutting your spending is an obvious one, but you can also find more ways to make extra money. It may be a challenge, but you are worth the work it takes to reach your financial goals.

Even if you are working towards day-to-day financial stability, you can still start investing. Like I said, even the smallest amount of money can be put towards investing. Not only does investing now help you reach retirement sooner, it may help you prevent negative financial situations from happening the in future.

 

2. Find an online brokerage or an expert to manage your investments.

So, now that you have actually started to set aside money, you will want to decide how you will invest it.

There are two main things you could do with your money. Either invest your money yourself, such as through an online brokerage, or find an expert to manage your investment portfolio. Part of learning how to start investing includes determining the company, platform, or person you will use to invest your first dollar.

There are many online brokers and brokerage accounts for you to choose from. My favorites include:

  • Ally Invest – This is a full service discount broker that doesn’t have a minimum amount, so you can start investing with them right away.
  • Betterment – Betterment offers an affordable way to invest your money. They have over 400,000 customers and over $14 billion has been invested through their service. With Betterment, you can invest with as little money as you want each month, which is great for a new investor!
  • Vanguard – I absolutely love Vanguard, and I recommend that you check them out. This is a great way to introduce both new and old investors to the stock market.

Also, if your employer has a retirement plan, then you will definitely want to look into that as well. If your company offers a retirement plan match, then this is where you will want to start as their retirement match is pretty much free money!

Also, in case you are wondering, a 401(k) is a type of retirement account that you get through an employer.

 

3. Decide where to put your money.

After you open your brokerage account, you will want to decide how exactly you will invest your money in the stock market. I think this might be one of the biggest hurdles for those wondering how to start investing and how to invest in stocks. There are a lot of what ifs in the investment world, and a good brokerage or expert will help you navigate as you decide where to put your money.

Basically, where you invest your money depends a lot on the level of risk tolerance you are willing to take and the time you have to watch your funds mature. A simple way of explaining this is that more time equals more risk and less time equals less risk.

For example: if you are in your 20’s and are using your investments for retirement, you have 30-40 years worth of investing ahead of you. You will likely be able to make some riskier investments knowing that the market will bounce up and down over time. If you are closer to retirement, you will probably want your funds in something that you are confident will make small but steady gains.

Choosing the stocks, mutual funds, etc. that you invest in is not the easiest thing because no one knows what will happen in the future. This is why it’s important to have a diverse portfolio.

When learning how to start investing for beginners, a professional will help you determine your goals, your risk level and how to diversify your investments in a way that will benefit you.

Even if you do have a professional helping you, it’s always important to do your own research on the types of investments available and which ones interest you.

Please remember that I am not an investment professional and that you should do your research when choosing who/what to invest in.

Related: How To Start An Emergency Fund

 

4. Monitor your investment portfolio.

So, you finally have invested your money, congrats!

The next step is to regularly track your investments. This is important because you may eventually have to change what you are invested in, put more money towards your investments, and so on.

Now, the key here is to not go crazy, and checking on your portfolio can be an exciting thing when investing for beginners. But, you do not want to become a person who checks their investments every hour of the day. That won’t help you at all as small changes in the stock market most likely won’t matter to you, especially if you are investing for your long-term future.

However, you do want to occasionally check your progress as things may change in the market, your investment interests may change, and you may even alter your goals.

A free tool that I recommend using to monitor your investments is Personal Capital.

You can see your investment portfolio all in one place so that you can easily track your performance, see your investment allocations, and easily analyze everything related to your investments. The Personal Capital Retirement Planner will also tell you if you have saved enough for retirement.

How can I start investing with little money?
To protect my privacy, this image is not mine – it was provided by Personal Capital.

 

5. Continue the steps above over and over again.

Learning how to start investing is the first step, but the final one is to continue investing well into the future, and you will want to continue these steps over and over again. Now that you know what steps to take, it only gets easier from here.

The hard part is done!

 

How much money should a beginner invest for the first time?

Even if you think you don’t have much, you can still start!

If you want to start with just a few dollars, I recommend reading A Beginner’s Guide to Micro-Investing.

 

How can I start investing with little money?

As a recap, you can start investing with little money by following these tips:

  1. Start saving your money.
  2. Find an online brokerage or an expert to manage your investments.
  3. Decide where to put your money.
  4. Monitor your investment portfolio.
  5. Continue the steps above over and over again.

What questions do you have when it comes to how to start investing for beginners? What investment tips do you have to share?


Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. This is a great springboard for taking action, Michelle!

    We were so stymied when we began investing — we ended up choosing a target date fund. Which was fine, because once we learned more, we honed in on a better strategy. You gotta start somewhere!

    1. Yes, everyone has to start somewhere ๐Ÿ™‚

  2. Yes, it’s all about the long-term.

  3. Most people wait for the right time and money before they start investing. With all the investment options listed in your article, I’d say don’t waste time and buy your first share now. Over the long haul, your investment will add up nicely. Nice list here Michelle.

  4. I heard a while back that a person could open as many Ira accounts as they want without limitation and dumped 10 grand into each one of them and let them sit for 20 years. Do you know if this is true by chance? True, I assume this is one of many ways people become billionaires. Your thoughts on this? ๐Ÿ™‚

    1. I have never heard this story.

      1. DNN

        Thanks. I kinda assumed this wasn’t true. L ๐Ÿ™‚ L

  5. Yes, I agree! That’s definitely the biggest mistake.

  6. Great post! One more reason to invest is inflation! Not many people realize that inflation is eating up a percentage of their savings every year — and that investing can help offset this. We have managed to save 50% of our income for nearly a decade, but not all of that time was spent investing. We notice inflated prices at the grocery store and grumble about it frequently.

  7. Kris

    I think the most important tip is to just do it no matter how much you’re willing to contribute. Acorns is a good start for those who do not want to invest that much. You can put in as little as you want and provide you as an example how investing works. The more you put in, the more it can grow. The power of compounding.

  8. This post is going to be my personal guide! I’m so nervous to start investing because there are just so many unknowns! Thanks for answering some questions!

  9. Hi Michelle,

    Investing isn’t as hard as people may think. You don’the have to ne a financial wizard. And like you mentioned there are so many resources.

    Many employers and Credit Unions also offer free investment information.

    But I agree that the most important thing is that it’s okay to start small, but just to start!

  10. Sounds like youโ€™ve ready Ray Dalio/ Tony Robbins/ Andrew Hallams work Bruce?!

    Itโ€™s such a great way to do it. All about finding the lowest fees. Vanguard is great!

    Have you invested in property too?

  11. David M

    Investing is crucial – a lot of people want to put it off because they don’t want to wait years and years to see a full return, but if you want to gain wealth, it’s an absolute must.

    While I totally advocate for savings and long-term investments such as stocks and real estate, I also recommend taking a small percentage and investing it into a low-barrier to entry business.

    It’s great to be able to learn the ropes, get in the trenches, and really build something you’re proud of.

    Amazon resale is what I chose. Everyone’s different – we all have different preferences for what kind of actions we like to take, what business model fits us best, etc.

    But if you can find something scalable, small, relatively low effort, and can provide you with decent cash-on-cash returns – I’d say take a small risk.

    The reward may be the perfect lifestyle business for you, which can provide volumes of capital for longer-term investments.

  12. Michelle

    I’m 49 and quite poor and have no money saved for retirement – it’s frightening and worrying. To be honest, your article didn’t help me much. I didn’t understand half of what you talked about. Sometimes the people that read your articles do so because they’re vulnerable in some way and really need advice from people who know what they’re doing. Not everyone understands the language of money. I’ve never actually had much of it so I’m not familiar with certain terms etc. I’m sure I’m not the only one.

    1. Hey Michelle,

      What questions do you have? What did you not understand? I can create another blog post.

      1. Martina Young Hopkins

        Where can I find an investment with 8% returns?

  13. Ritu Pathak

    I never knew that I can start investing with my little pocket money saving. I’m glad that i read this post before its too late. I’m opening a demat account in Kotak Securities now and will start following your guides.

  14. Martina Young Hopkins

    Hi Michelle, you mentioned 8% returns on investment. Where can I find such an investment? I have no financial education or background and all of this is jargon to me. I have some savings and Iโ€™m only making 6/10 of a percent interest. Iโ€™d like to find out where I can make a wise investment choices. I recently lost $3000 in a retirement account. Do I have to go to school to learn how to invest properly? Please help!